Best Buy to scrap all UK ‘Big Box’ stores

Monday 07 November 2011 - Editorial Assistant

US-based electricals retailer Best Buy has today announced that its 11 large out-of-town outlets in the UK are to close just 19 months after launching in the country.

A depression in consumer spending on electrical products meant it was impossible for the retailer to realise its initial ambition of rolling out its ‘Big Box’ stores right across the UK and, instead, it will focus on it continuing partnership with UK-based phone specialists The Carphone Warehouse (CPW).

Losses of £62 million were incurred by Best Buy UK in the year ending March 31st 2011, and a further £47 million was lost in the subsequent six months to September 30th. Whilst the store closures are completed around £25 million to £30 million of further operating losses are expected whilst the total cash cost of the closures could reach as high as £75 million after tax.

Commenting on the closures, CEO of CPW Roger Taylor said: “The 11 Best Buy UK ‘Big Box’ stores have performed exceptionally at the level of customer satisfaction, but they do not have the national reach to achieve scale and brand economies.

“Due to the lack of visibility of an acceptable rate of return on historical and future potential investment we have decided against rolling out more ‘Big Box’ stores and we will be closing our existing stores, subject to consultation with our employees.

“Our immediate focus is our people and we are confident that the large majority will be offered alternative positions elsewhere in our UK business.”

Best Buy UK currently employs over 1,000 people at its Big Box stores who will all now be nervous about their positions, with the company planning to entirely focus its resources on a new mobile and multichannel strategy.

In contrast to its larger stores, the Best Buy concessions in CPW’s Wireless World outlets have traded well by offering a range of mobile and other connected devices on the high street and the US firm will look to exploit other global multichannel possibilities going forward.

Following a comprehensive strategic review CPW has agreed a new deal with Best Buy under the name of Global Connect, which will see a new profit share agreement between the companies with the intention of replicating the success of Best Buy Mobile outside of the US and European markets.

CPW has also announced the disposal of interest in Best Buy Mobile US and Canada profit share agreement to Best Buy for £838 million in cash, and following the transactions the assets of CPW will comprise a 50 per cent stake in Best Buy Europe, which in turn will own the core European mobile phone retailing operations, CPW Europe.

Taylor added: “The sale of our interest in Best Buy Mobile crystallises significant value for our shareholders, while the increased focus on the Connected World in Europe gives the potential for significant value creation in the near to medium term.

“In addition, the new Global Connect agreement represents an exciting and low risk opportunity to recreate the success of Best Buy Mobile and roll out our connectivity strategy into high growth emerging markets.”

As yet there has been no formal statement from Best Buy on the closures.